Changes on the way for Russia’s textile care markets

Russia’s laundry and drycleaning markets could see significant changes in the future according to analysts’ predictions. This will come through expansion into the regions, foreign investment and modernisation.

While such predictions may not be realised for some years, these industries have been developing steadily amid ever growing demand for such services from local consumers.

At present the Russian market for laundry and drycleaning services is estimated to be 10 – 12 billion RUB (USD$300million – 360million).

The market as a whole is growing by about 10% a year with the Moscow region expanding much faster at a rate of around 15 – 20%.

Laundry and drycleaning services were always popular in Russia and the former USSR and during the Soviet regime the country had around 7,000 specialist laundry and drycleaning businesses, all state-owned.

The collapse of the USSR resulted in a severe decline for the industry and in demand for such services, triggered by a series of political and economical crises at the beginning of 1990s.

From 1990 – 2000, the number of laundry and drycleaning enterprises in Russia fell sharply as businesses closed or changed their profile and the market shrunk to a quarter or a fifth of its previous size. In addition, the country’s industrial technology park became obsolete, reducing production capacity significantly.

But from 2000 onwards the industrial situation started to improve, despite the global recession and industry having problems in obtaining loans.

At present drycleaning and laundry services account for 0.7% and 1% respectively of the total volume of consumer services in Russia.

However, the figures are much higher for Moscow and St Petersburg, Russia’s largest cities – estimated at 1.8% and 2.4% respectively.

Moscow’s laundry market has an estimated output of 14,000 – 16,000tons per year.

The Russian Federal State Statistics Service (Goskomstat) estimates the capacity of Moscow’s drycleaners at 10kg of clothes for each 10,000 inhabitants. This is significantly higher than the average Russian figures.

According to Moscow City’s Department of Consumer Market and Services, there are about 150 drycleaning and laundry enterprises with around 1,000 pick-up points and 18 large laundry businesses with capacities of up to 30tons per day.

In addition the city has around 50 institutional laundries and drycleaners, which are owned by hotels, hospitals and military establishments. Official statistics do not record regional figures.

Largest player

The Diana company, a local network of drycleaning and laundry businesses, remains the largest player in the Russian market, according to a leading consultancy in this sector. Its data show that Diana has around 40% share of the market and is recognised by over 70% of consumers.

Other important companies include Kontrast, Lavanderia, Lisichka, Leda, Nicco, 5àsec and Bleu de France.

To date Russia’s vast provincial areas have been largely undeveloped but this is changing slowly as local chains gradually expand into these areas.

In contrast to the EU and US markets, in Russia most laundries and drycleaners are expanding directly rather than through franchises, which are still unusual here.

Andrei Gusev, Diana’s development director says that the Russian laundry and drycleaning markets are still a long way from saturation and have a high potential for growth.

He says that the most common items in a Russian drycleaner’s load are suits, jackets and coats (including leather and suede as well as fur coats).

Ironing is seen as one of the main reasons for taking clothes to the drycleaner as many customers feel that home ironing is difficult.

Demand for the service also depends on the season and also on the region and its climate.

Gusev adds that recently there has been an increase in demand for drycleaning of accessories such as luggage, umbrellas, suede handbags and shoes but it is only the richer customers that want this service.

Vladimir Martynov, director of Lokis company, one of Russia’s leading chains of laundries and drycleaners underlines the importance of income levels. He says: “Our main clients are people with incomes above the average.” He adds that such people have long been used to using these services. Demand from customers with medium income levels is also stable but people with low incomes prefer to clean clothes at home.

Seasonality is another strong factor in demand for drycleaning, which is at its highest from August to October and from April to May.

The seasons are less important for laundry services where demand is more or less stable throughout the year.

In general terms low income levels and a lack of awareness amongst local consumers are the main obstacles to rapid growth.

At present, the Russian laundry and drycleaning industry still falls behind the EU in terms of the rate and level of development.

For example, in the EU there may be one drycleaner per 10,000 residents but in Moscow the estimate is one per 100,000 – 150,000 and the number of residents per cleaner would be much higher in the provinces.

Self-service laundries are almost unknown in Russia, another marked difference from the situation in the EU. As yet, Russia’s textile rental market is also well behind that of Europe.

In contrast to the EU and the USA where laundry and drycleaning services have long been the norm, in Russia most laundry is done at home.

Hussein Chabdarov, is the commercial director of the Centre of Municipal Equipment, which specialises in selling machines for laundry and drycleaning businesses.

He agrees that most consumers have not acquired the habit of taking clothes and household items along to a laundry or drycleaner.

Chabdarov comments: “The majority of local people still prefer to wash their clothes at homes.”

He adds that they will sometimes use acetone to remove stains and says that only 7 – 8% of the local population will regularly use professional services.

Imported machines

One of the main problems for the Russian laundry and drycleaning industry is the low level of technical equipment, even though sales of specialised equipment have increased significantly in recent years.

Most local drycleaners and laundries prefer to buy equipment abroad because locally manufactured machines are of poorer quality using low grade steel and the equipment has a shorter lifetime.

Until recently there was no production of industrial equipment in Russia, however in recent years some capacity has been established.

The lack of insurance schemes is also holding back growth.

In the EU and the USA local insurance systems cover about 70% of the cost of items damaged by machine failure or breakdown but Russia still does not have such a practice.

Future prospects

Analysts from the Russian Association of Laundry and Drycleaning Enterprises (RALDC) predict that the domestic market will continue to grow in the future, as local standards of well-being and levels of culture improve.

Already more and more Russians prefer to use specialised drycleaning and laundry services than washing clothes at home.

The most intensive growth is expected to be observed in the big cities, including Moscow, St Petersburg and Siberia’s largest city Novosibirsk.

According to the predictions of Russian analysts, the number of laundry and drycleaning enterprises in the largest cities of the country is forecast to grow by 15 – 20% annually during the next few years.

More businesses and pick-up points are expected to be opened both in new locations and in shopping centers and other similar centres.

RALDC analysts also predict that during the next years the majority of leading local players will start to expand into the regions and that this provides huge potential for further growth.

At first, expansion will focus on cities with a population of around 1million and then spread later to less densely populated regions.

In addition, there is hope that the industry will start to modernise from a technical point of view.

Many companies have already started to replace obsolete equipment.

Recently foreign investors have begun to take an interest in entering the Russian market.

For example, 5àsec, one of the EU’s largest providers of drycleaning and laundry services, started to expand into Russia some time ago.